Why CheckCheck

Mobile Deposit Risk

Before remote deposit capture (“RDC”) technology existed, when a customer deposited a check at a branch or an ATM, the bank took physical possession of the check.
However, when a customer deposits a check via RDC, the customer retains possession of the check.
Retaining possession enables a customer, by honest mistake or fraud, to deposit the check again, or to cash the check.

Under the UCC, The “holder in due course” doctrine which governs negotiable instruments — such as checks — dictates that a party who acquires a negotiable instrument in good faith, for value, and without notice of certain facts, takes it free of competing claims of ownership and most defenses to payment.
Prior to RDC, each checking transaction involved a single, unique paper check that only one “holder” was capable of possessing.
Now, however, checking transactions via RDC involve both a paper check and a digitized “substitute check” —that can be replicated multiple times.
As a consequence, situations often arise where multiple parties can claim to be “holders in due course,” meaning each has a claim of entitlement to payment of the same instrument and the drawer of the check must pay twice.

The UCC does not address the possibility that a single check could be presented for payment multiple times because presentment has historically required physical possession of the original instrument.
Banks and check cashing entities are unable to detect when a check being presented to them has already been deposited via RDC because that deposit method does not alter the physical check.
Criminals have exploited this flaw, rapidly adopting the “duplicate presentment” of checks to defraud banks and check cashing entities.

Regulatory efforts to address the duplicate presentment problem have focused on warranties and shifting risk (i.e., Check 21 Act), but do not address the underlying problem.
Commercial efforts to address the problem require the recipient of the check to physically alter the check prior to deposit, but are easily exploitable.
There is no existing deterrence mechanism that fully addresses and solves this problem.

The direct impact of check fraud has been estimated at over $20 billion per year, and is rapidly increasing.
Indirect costs from check fraud are also significant, as human-based fraud prevention methods are labor-intensive.
Due to duplicate presentment risk, most banks cap the amount that customers can deposit mobily–often at amounts that are below the average check value–which greatly reduces the potential efficiency of the RDC technology.

CheckCheck was formed to solve this problem by using a printed, digitally-enabled indicia that cross-references a secure database for verification.
CheckCheck’s patented IP or “digital watermark” bridges the physical/digital divide and streamlines the verification process while also providing enhanced security measures available across all points of deposit.
By verifying each checking transaction in real time, CheckCheck’s system is the only solution to fully address the issue, and has the ability to drastically reduce check fraud saving financial institutions and their customers billions of dollars per year.